Bearing in mind the political reality that the Government is facing the prospect of a national wage agreement which is expected to increase nominal wages by 5 per cent at least, the structure of our income tax system means that tax bands and credits would have had to increase proportionally just to leave people where they are in terms of take-home pay. It is difficult to predict an annual rate of inflation at this point for the short to medium term. But an inflation rate of between 3.5 per cent and 4.5 per cent seems realistic, especially in the context of rising grocery and energy costs.

So an increase in the basic income tax credits, the personal and PAYE credits, of €125 each is small beer by any standard.

For a self-employed person, an increase in the personal tax credit of €125 is equivalent to just over €2 per week. Likewise, increasing the standard rate income tax band by €2,500 a year makes much less difference in the context of general wage increases in the order of 5 per cent plus.

Social partners are exerting pressure on the Government through industrial action in the form of working to rule to bring about a nominal national wage agreement for the public sector of at least 5 per cent. Government, for its part, is hoping to peg a public sector wage deal at 5 per cent by sweetening it with adjustments to tax credits and tax band widening.

Budget 2027: Measures put public........

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